'Time to build, option value and investment decisions': a comment

We correct the analysis of the model of time to build in Majd and Pindyck ( 1987 Journal of Financial Economics 18, 7-27) for the omission of an essent ial optimality condition, Our analysis reveals an additional insight: long times to build reduce the effects of increased project value volatility (i, e., higher investment thresholds) in comparison to standard real option mod els of investment under uncertainty, where investment is instantaneous. Thu s, a 'naive' NPV rule can sometimes be an appropriate initial guide to inve stment. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classificat ion: C63; D92.